- Associated Press - Friday, September 16, 2011

RICHMOND — The Virginia Supreme Court ruled in favor of an insurance company Friday in the nation’s first legal test of whether insurers may be liable for claims arising from global warming.

The justices unanimously ruled that environmental problems allegedly caused by power-producer AES Corp.’s emission of greenhouse gases were not “occurrences” covered by a commercial liability policy issued by Steadfast Insurance Co.

Christina M. Carroll, a D.C. attorney who counsels insurance clients on climate change issues, said the Virginia case was being closely watched nationally because it’s the first of its kind to reach an appellate court.

“Other states are not bound to follow the ruling, but they will look at it,” said Ms. Carroll, who was not directly involved in the case. “Insurers would hope that it’s a trend and will carry on elsewhere.”

The case arose from a lawsuit filed in 2008 by the Native Village of Kivalina, located on the tip of a small barrier reef on the northwest coast of Alaska, about 70 miles north of the Arctic Circle. The native village claimed that emissions of carbon dioxide and other greenhouse gasses by Virginia-based AES contributed to global warming, causing ice protecting the shoreline to melt and exposing the village to storm surges and erosion.

Steadfast said it was under no obligation to defend AES or cover any damages because the environmental problems alleged by Kivalina were not “occurrences” as that term is defined in the policy. A circuit court judge and the Supreme Court agreed, ruling that the term is synonymous with “accidents” — and the intentional discharge of greenhouses gases, and its predictable consequences, cannot be considered accidental.

“Whether or not AES’s intentional act constitutes negligence, the natural and probable consequence of that intentional act is not an accident under Virginia law,” Justice S. Bernard Goodwyn wrote.

L. Steven Emmert, attorney for AES, said he was surprised by the ruling.

“Based upon the briefing and oral argument, I thought it would be reversed,” he said.

Steadfast’s attorney, former Georgia Supreme Court Chief Justice Leah W. Sears, referred questions to the insurer’s parent company, Zurich Financial Services.

“We welcome the chance to bring this matter to a close and believe the court’s ruling speaks for itself,” the company said in a written statement.

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